Who Should Be Investing In London Property?

London is a property market that operates in an entirely different universe to the rest of the UK. When we look at micro markets, London is an excellent example that defies even the harshest of economic conditions: it just keeps on growing.

Increased interest from foreign investors in prime London property, including a large proportion from Russia and China and, more recently, mainland Europe, has helped push property prices up more than 50% since 2008.

Rents, too, have continued to rise. The average rent for a property in London has increased by 38% since 2009. The average rent on a flat or house in London has already hit £1,500 per month.

The only drawback for investors who opt for the London market is the relatively high price you will pay for a property.

This can put pressure on yields – some of the more expensive areas of London, such as Knightsbridge, will achieve yields barely above 4%, and this is why London is not necessarily the best place to invest from a cash flow perspective; however, when it comes to an exit strategy, there will be no shortage of people happy to pay a good price for your property.

If you are able to work with a slightly lower net yield and use your investment as a store of wealth, then you are onto a winner when you exit the market place – as the growth return is likely to be extremely high in London.

If you want to spend less on your property, however, and see higher rental yields, then you should look at cities like Manchester or Liverpool, where you can expect to receive rental returns of 7% to 8%.